Monday, May 14, 2012

OK, Greece. Are they really really clever or just so completely and utterly stupid they shouldn't be trusted with a pair of blunt scissors, even the rounded end ones? We still hang on to the hope that there isn't a coalition government and the population are forced back to the ballot box with a clear instruction that what they are voting for is euro membership or not.

As for today we feel déjà vu and would suggest that the market is really looking for some sort of policy response or else they will just keep drilling prices. The Eurostriches are once again silent on coordinated policy, but this time rather than it due to their heads being buried in the sand, they are too busy with their own internal fights

However,despite the new levels of euro panic TMM think they have seen this sort of day before and can sum it up as "The 19 stages of a Eurogeddon Monday". All times are London based.

1) Expect resolution on a European issue over the weekend.

2) On Sunday it becomes apparent there is no resolution.

3) Twitterati and blogosphere go into overdrive

4) Asia opens and sells hard.

5) Media quote twitterati and the Asian price falls.

6) 08.00 Europe, now whipped up, opens and sells hard.

7) 08.30 Media and commentaries quote the resultant price moves including lots of " haven't seen this price since the last time"

8) 09.00 More Selling.

9) 09.30 Having sold, the market takes a pause to notice that there hasn't actually been any new news.

10) 10.00 All talk is to the downside with more gloom recycling but no further price response.

11) 11.15 US wakes up to a deluge of commentary saying SELL and to seeing prices lower.

12) 12.00 US sells and prices fall again

13) 12.30 Models join in and sell.

14) 13.00 Europe relieved to see US commenters also saying the markets are a sell.

15) 14.30 US Equity markets open and fall hard to the "toldjaso" relief of all those who have sold in the last 24hrs.

16) 15.00 US notice that there is actually no new news and some shorts from Sunday Asia open are covered.

17) 15.15 Momentum picks up to the upside accompanied by "just a short term bounce, sell the rally" comments.

18) 16.00 Small positive comment from a Eurocrat/Greek and markets recover further into European close.

19) Tuesday 10am - "Well it IS going to happen one day" - short term positions closed or moved to long term book as it morphs into a "Turnaround Tuesday".

Team Macro Man are really hoping the Eurocrats or Greece can do a bit of a "Manchester City" with a final seconds redemption, but it does feel today as though a lot of the crowd have already left the stadium.

I hear you on the optimism TMM but I thought if Greece starts to look like it is going to leave you were going to abandon ship. The more Eurocrats talking heads keep mentioning an exit the more I feel like they are willing to let it happen and try to deal with the consequences. This whole episode is sounding very Lehman like.

Spot on!..Polemic..but trust me , one day the Euro-Fudge factory spin-machine is going to find out just like the rest of in the real world that "words" having an diminishing effect...well some of us in this world...

Clearly there is other stuff going on (understatement) but it is interesting that the commodity-linked and EM complex did not respond to the easing signal out of China. Some fiscal measures in China also. Markets may consider authorities to be behind the curve.

"Team Macro Man are realy hoping the Eurocrats or Greece can do a bit of a "Manchester City" with a final seconds redemption..."

That was a really amazing game. LB found himself applauding first the plucky underdogs of QPR, and then the incredible comeback that made City worthy champions.

As far as the market is concerned, LB has done a "Joey Barton" (another daft Scouser). Lashed out slightly unnecessarily at the Long Bond, and left the field a little early, after a cheeky knee to the back of the Dollar Index, then forced to watch the painful debacle in his equity-rich portfolio.

Still, QPR escaped the big drop in the end, and just like Mad Joey, LB is hoping to be back on the ball again before too long.

There really wasn't any news today, just people who wanted to sell. LB expects the ECB to pull off another sensational save after the Greek politicians have someone explain in detail what a 75% devaluation looks like. [Argentina, 2001-2002].

The possibility exists that a Grexit (plus ongoing bank recap efforts in Spain and perhaps another LTRO to protect French/German banks) might end up making the EUR stronger by eliminating a source of weakness and persist uncertainty. The thing is, if you live in the US, you know that the USD isn't going to be strong for long. Bernanke's finger is already close to the QE button again.

Greece is irrelevant. They are small and they are insolvent, but this is now widely known. It is possible that they go Argentina, perhaps in a rather messy way, but without a significant impact on the rest of the EU. We may yet see tanks in Athens and the Colonels may return with the drachma, but the rest of Europe has had time to prepare for this.

Portugal is tricky, and this will be more interesting, but that is down the road. A Spanish exit is very very distant, despite the problems they face.

C says'Sorry LB ,but I don't call that food for thought.It's simply more of the usual conjecture which is no more valuable than the noise of the herd thundering towards the sell button.As the saying goes verybody's got an opinion and we are going to get a chnace to hear them all in the weeks and months ahead.The only thing I can really know is get used to more volatility.

i keep coming back to lehman. at the time many knew they had junk on their book and the stock was getting killed for several months. When the fed finally pulled the plug some thought that unlike bear, the markets had now had enough time to prepare for the event (or else why did the fed let them go under)

but unintended consequences happened and the world froze. Lehman/Greece - AIG/Spain seem very similar to me. And pinning my hopes that the ECB comes to the rescue is something I want to do 20-40% lower, not right here. They will do it, but they will need a big push before.

Abee , we are going to change when it becomes apparent to US that they are going to leave . not to every Tom Dick and Harry that is telling us they are going to leave. As we said if they go to the polls again AND they don't put this up as a in or out of euro vote and it goes feral again then we'll join the "oh my god"ers. But this is still the classic price action of a eurogeddon monday and we should know more by close of play tomorrow.

C at 7..19.. you sum it up nicely.. a lot of opinion today and very little new fact. And new rules appear to be back to "no news is (apparently) bad news".

Think we might run a little survey tomorrow .. but no head start clues.

Aside .. God I'm getting fed up with the BBC .. so what do they go straight to with JPM issue? Systemic risks? regulatory oversight? share price losses? Volker? NOPE .. Dimon's bonus last year and should he repay it. Their banker-pay self-righteous agenda is swamping real issues .. imagine .. "Europe explodes, riots on the streets, mass starvation" would be covered by BBC as "Does Van Rompuy deserve last years bonus?"

polemic i hear ya. I am not saying to go short here and it is good perspective that nothing new has happened BUT

1) Market hates uncertainty. The longer this process takes we could be 10-15% lower in a a few days

2) Selling begets selling

My perspective is that I want my book to be in good enough shape should a melt down happen to be able to take advantage of it, not be stuck with a whole lot of red everywhere. Hence why I am holding HYG short here. I just want some grey swan insurance at this point to help offset the inevitable losses my holdings will take should this mess deteriorate.

"Surely there will be a policy response" has never struck me as an investable thesis,and yet at some point central bankers do tend to over-react. In fact if anyone can point me to a link to a British comedy clip from 2008 or 2009, my gratitude would be immense. It was in interview format with a banker. I am still laughing at this line "we're bankers, we panic, that's what we do."

C says'I note the Asian overnights broadly made early lows and then to varyong degrees attemped to recover them.Appears to indicate an unwillingness to immediately sell further pending events/data.US dollar basket now back at the high achieved prior to the March options expiry and of course we are again coming into expiry dates.Time to reset against this noise?Against that the US close lacked conviction,BUT were US data sets (and we have a few) to hold up we would have cover buying I think.The problem is we have to deal objectively with the above context aware that under us we have global political events that could reek serious damage to risk portfolios.I for one choose to stay lighter than my norm and trying to derive yield from picks in staples and probably some basic power/utility companies.Hardly thrilling.

C says'It also looks to me like the CRB group are due to fill some gaps .The crescendo pattern of recent days doesn't usually become linear when selling has already been so heavy indicative of margin liquidations.Pause time probabilities.

c SAYS'Just looked at a chart of JPM for interest and it sucks to me of capitulation.The combo of fairly peripheral issue sucked into soemthing wider ,but of no specific relevance equals blind panic leads to severe short squeeze. Follow my thoughts at your own largesse,but that is what it looks like to me.Moreover I note the same relative strength in Wells Fargo I mentioned earlier and in a property market that I think will gradually improve with them at the forefront of lending I can't see why it would be a sell.

I dare say I could find others if I looked .And of course I still see US staple sellers as a decent staple play.

And C, there are a raft of soothsayer turn signals in everything usd.. including gold. Soothsayer nailed the top in that. And SP1 signal matures today.. all the signals correlate, but as its been a correlated move down.. no surprise. So the church of the soothsayer will be tempted to t.p.

C says'"DeMark",I see ,I think I've heard of that before. In some US films you get this 3rd generation New Yorker saying things like "Joey it's your job to finger "Demark" so Suzy can lift his wallet". I assume it refers to the concept of sending someone home poorer.